Transit
TUG Member
artical found on flyertalk.Oh how interesting things could beThese days, there’s no business like the hotel business, at least in investment circles, thanks to a shift in the hospitality industry from public financing to private equity.
Following the post-9/11 hospitality industry downturn, investors turned to REITs (Real Estate Investment Trust)—real estate-based securities that trade like stocks—to cash out hotel holdings. Over the past several years, however, the hotel sector has rebounded spectacularly, making REITs all the more desirable to cash-laden private equity players.
Recently, powerhouse firms, such as the Blackstone Group that got things rolling last year when it purchased MeriStar Hospitality Corp., have been gobbling up REITs like pieces on a Monopoly board.
Last week, for a price of approximately $3.37 billion, shareholders of Four Seasons Inc. approved the sale of the Toronto-based hotel company to Microsoft's Bill Gates, Saudi Prince Alwaleed Bin Talal, and Four Seasons’ CEO, Isadore Sharp.
The day before the board of directors of Starwood Hotels & Resorts Worldwide Inc. ignited widespread speculation that they were positioning the company for a possible sale following the dismissal of CEO Steven J. Heyer. Heyer, according to a statement released by Starwood’s board, was released from his contract over issues stemming from his management style.
All of which brings us to what Disney Parks and Resorts Chairman Jay Rasulo referred to as “something rare” during his remarks at the Disney Company’s February 7 Investors Conference at Walt Disney World.
“I'm going to pull back the curtain and share some of the ideas our business team and Imagineers have been thinking about,” Rasulo told his audience.
He went on to say that 71% of family vacationers who visited U.S. cities last year stayed in hotels that lacked Disney storytelling, themeing, and detail.
“Expanding our resorts beyond our theme park destinations could help us claim a greater share of the hotel industry,” said Rasulo.
Rasulo really caught analysts’ attention when he said, “We could develop regional resort properties located outside of metro areas. We could develop urban hotels in cities that are major tourist destinations for families. We could build destination resorts in exotic locations, or boutique-branded hotels at a variety of price points.”
Disney's Grand Californian Hotel at the Disneyland Resort in Anaheim, California
Image copyright© Disney.
Initially, coming as they did at a meeting of financial analysts, Rasulo’s remarks were only seen as a means to gauge Wall Street’s appetite for the Mouse spending big bucks to expand its stateside operations, in light of the less than spectacular returns received on the billions invested in Hong Kong Disneyland, Disney’s California Adventure, and Disney’s Animal Kingdom at Walt Disney World.
If, as many have suggested, that’s what the sharp-pencil MBAs back at the Michael Eisner Team Disney Burbank building had in mind when they first helped Rasulo craft his remarks, they would soon be in for a surprise.
A Funny Thing Happened on the Way to Wall Street
Long known for not being happy with the way entertainment giants like AOL Time Warner, Vivendi Universal, News Corp., Viacom, and Disney kept shop, The Street, for many years, has been particularly hard on the entertainment segment of the market.
To make matters worse, analysts were seldom put at ease by the public fits and feuds of management figures like Rupert Murdoch, John Malone, and Sumner Redstone. And they really weren’t pleased with the all-too-public spectacle of boardroom-level warfare between Walt Disney’s nephew Roy E. Disney and former Disney CEO Michael Eisner.
Then things began to change in the entertainment industry. An established and reliable corporate citizen, GE, via its NBC Television division, took over Universal. Time Warner dumped AOL from its title, and appears ready to cut it loose altogether. Murdoch and Malone swapped stock, kissed, and made up. Redstone split Viacom into two media companies and, thanks to the efforts of CEO Bob Iger, peace has broken out and calm restored at Disney.
In addition to making peace, Iger salvaged the Mouse’s relationship with partner Pixar by buying the Emeryville animation studio. He resurrected Disney’s badly tarnished reputation for creativity and imagination by making the driving force behind Pixar’s creative success, John Lasseter, responsible for all things creative at Disney Animation and Imagineering.
The really remarkable outcome, though, has been the performance of the Mouse’s stock in the 18 months since Iger assumed control. For the first time in a long time, all four of its divisions are humming along profitably at the same time. The price of Disney shares held firm following the Pixar purchase, rising from a closing price of $25.44 the day the deal was announced to a high of $35.85 a year later. Disney closed yesterday at $34.91 a share.
With all this good news, Wall Street seems poised to cut the Mouse some slack. When Parks and Resorts’ Rasulo intimated Mickey wanted to start expanding the Disney hotel experience in cities around the country, the market seemed to take the news in stride as if it were the next logical thing to do. Some analysts even went a step further.
There are two ways to get into the hotel business. The first is to buy a lot of expensive urban and suburban land, design a lot of buildings and facilities, hire scads of contractors from all over the country, and sit back and wait three to five years for the doors to open after hiring and training thousands of workers to staff your hotels.
The other way is to buy an existing hotel company.
Square One
No sooner had Rasulo stated that expanding Disney’s resorts beyond their two current locations could help the company “claim a greater share of the hotel industry,” analysts in his audience began to wonder aloud which remaining REITs would be a good match for the Disney hotel experience.
If Disney is seriously thinking of expanding its hotel business beyond the boundaries of its Central Florida and Southern California properties, the reasoning goes, it would be far more cost effective to buy a company with a cadre of well-known brands and an established cash flow than it would to sink billions of dollars into the ground and wait for the day you can begin to collect receipts.
As Rasulo himself said, “Our hotels would need to continue to operate at the premium margins we've come to expect from our business. So we would only expand into environments that offered solid returns. We would also be careful to preserve our use of capital, especially since third-party equity capital for hotel investments is readily available. We may choose to fund our projects partially or fully with outside partners who recognize the value of the immersive Disney vacation experience.”
Our put another way, Disney could leverage its stock to merge with an existing REIT with multiple brand lines to become a majority stakeholder in the company, in much the same way it holds the lion’s share of stock (52%) in Citadel Communications, which owns ABC Radio, formerly owned by Disney’s ABC Broadcasting.
Rasulo has said if Disney does go forward with its hotel expansion plans, the new resorts would be built around its Grand Collection of hotels, such as the Victorian beach resort inspired Grand Floridian Hotel at Walt Disney World, and the Arts and Crafts inspired Grand Californian Hotel at the Disneyland Resort in Anaheim.
That would mean by partnering with a hotel company with multiple high-end luxury brands, which often have properties in the same markets, the Mouse could see a faster return on investment by selling one hotel line and using the funds to convert another to the Disney brand. But where to find such a partner?
With Nine You Get Egg Rolls
Based in White Plains, New York Starwood Hotels & Resorts Worldwide is one of the world’s largest hotel and leisure companies. The company owns, operates, franchises, and manages hospitality properties under nine brands: Sheraton Hotels and Resorts, Four Points by Sheraton, Westin, The Luxury Collection, Le Méridien, St. Regis, W Hotels, Element, and aLoft.
Starwood either owns or operates 850 hotels in 95 countries, with a total of 232,000 rooms and tens of thousands of square feet of meeting and events space. They have regional resort properties located outside of metro areas, urban hotels in cities that are major tourist destinations for families, destination resorts in exotic locations, and boutique-branded hotels at a variety of price points.
Former Disneyland Resort President Matt Ouimet.
Image copyright© obe-mediaone.
With the sudden departure of former CEO Steven J. Heyer, many hospitality industry analysts believe the company to be a prime target for takeover, either willingly or not,
No one is publicly suggesting the White Plains innkeeper and the Burbank conglomerate join hands. Privately, however, some are suggesting that even though it’s much sooner than Jay Rasulo’s peek into Disney Parks and Resorts future would have indicated, Starwood’s current predicament and likely availability seems tailor-made for Disney’s hospitality expansion plans.
Relations between the two companies are thought to be quite friendly. Starwood presently operates the only two non-Disney hotels on property at Walt Disney World, Sheraton Hotels and Resorts’ Swan and Dolphin luxury hotels.
George Mitchell, Disney’s former chairman, also served on Starwood’s board of directors. Additionally, Starwood Hotel Group President and newly appointed interim Chief Marketing Officer Matt Ouimet is the former president of the Disneyland Resort, and is a 17-year Disney veteran having also served as president of the Disney Cruise Line and executive general manager of the Disney Vacation Club.
Whether or not Disney is truly interested in rapidly expanding its presence in the hotel industry, it appears that holding informal conversations with old friends and acquaintances at Starwood would, at the least, be the polite thing to do while the hotelier sets the management of its house in order.
[As a direct result of the purchase of Pixar Animation Studios by the Walt Disney Company, C. W. Oberleitner now owns two shares of stock in the Walt Disney Company.—Editor]
Following the post-9/11 hospitality industry downturn, investors turned to REITs (Real Estate Investment Trust)—real estate-based securities that trade like stocks—to cash out hotel holdings. Over the past several years, however, the hotel sector has rebounded spectacularly, making REITs all the more desirable to cash-laden private equity players.
Recently, powerhouse firms, such as the Blackstone Group that got things rolling last year when it purchased MeriStar Hospitality Corp., have been gobbling up REITs like pieces on a Monopoly board.
Last week, for a price of approximately $3.37 billion, shareholders of Four Seasons Inc. approved the sale of the Toronto-based hotel company to Microsoft's Bill Gates, Saudi Prince Alwaleed Bin Talal, and Four Seasons’ CEO, Isadore Sharp.
The day before the board of directors of Starwood Hotels & Resorts Worldwide Inc. ignited widespread speculation that they were positioning the company for a possible sale following the dismissal of CEO Steven J. Heyer. Heyer, according to a statement released by Starwood’s board, was released from his contract over issues stemming from his management style.
All of which brings us to what Disney Parks and Resorts Chairman Jay Rasulo referred to as “something rare” during his remarks at the Disney Company’s February 7 Investors Conference at Walt Disney World.
“I'm going to pull back the curtain and share some of the ideas our business team and Imagineers have been thinking about,” Rasulo told his audience.
He went on to say that 71% of family vacationers who visited U.S. cities last year stayed in hotels that lacked Disney storytelling, themeing, and detail.
“Expanding our resorts beyond our theme park destinations could help us claim a greater share of the hotel industry,” said Rasulo.
Rasulo really caught analysts’ attention when he said, “We could develop regional resort properties located outside of metro areas. We could develop urban hotels in cities that are major tourist destinations for families. We could build destination resorts in exotic locations, or boutique-branded hotels at a variety of price points.”
Disney's Grand Californian Hotel at the Disneyland Resort in Anaheim, California
Image copyright© Disney.
Initially, coming as they did at a meeting of financial analysts, Rasulo’s remarks were only seen as a means to gauge Wall Street’s appetite for the Mouse spending big bucks to expand its stateside operations, in light of the less than spectacular returns received on the billions invested in Hong Kong Disneyland, Disney’s California Adventure, and Disney’s Animal Kingdom at Walt Disney World.
If, as many have suggested, that’s what the sharp-pencil MBAs back at the Michael Eisner Team Disney Burbank building had in mind when they first helped Rasulo craft his remarks, they would soon be in for a surprise.
A Funny Thing Happened on the Way to Wall Street
Long known for not being happy with the way entertainment giants like AOL Time Warner, Vivendi Universal, News Corp., Viacom, and Disney kept shop, The Street, for many years, has been particularly hard on the entertainment segment of the market.
To make matters worse, analysts were seldom put at ease by the public fits and feuds of management figures like Rupert Murdoch, John Malone, and Sumner Redstone. And they really weren’t pleased with the all-too-public spectacle of boardroom-level warfare between Walt Disney’s nephew Roy E. Disney and former Disney CEO Michael Eisner.
Then things began to change in the entertainment industry. An established and reliable corporate citizen, GE, via its NBC Television division, took over Universal. Time Warner dumped AOL from its title, and appears ready to cut it loose altogether. Murdoch and Malone swapped stock, kissed, and made up. Redstone split Viacom into two media companies and, thanks to the efforts of CEO Bob Iger, peace has broken out and calm restored at Disney.
In addition to making peace, Iger salvaged the Mouse’s relationship with partner Pixar by buying the Emeryville animation studio. He resurrected Disney’s badly tarnished reputation for creativity and imagination by making the driving force behind Pixar’s creative success, John Lasseter, responsible for all things creative at Disney Animation and Imagineering.
The really remarkable outcome, though, has been the performance of the Mouse’s stock in the 18 months since Iger assumed control. For the first time in a long time, all four of its divisions are humming along profitably at the same time. The price of Disney shares held firm following the Pixar purchase, rising from a closing price of $25.44 the day the deal was announced to a high of $35.85 a year later. Disney closed yesterday at $34.91 a share.
With all this good news, Wall Street seems poised to cut the Mouse some slack. When Parks and Resorts’ Rasulo intimated Mickey wanted to start expanding the Disney hotel experience in cities around the country, the market seemed to take the news in stride as if it were the next logical thing to do. Some analysts even went a step further.
There are two ways to get into the hotel business. The first is to buy a lot of expensive urban and suburban land, design a lot of buildings and facilities, hire scads of contractors from all over the country, and sit back and wait three to five years for the doors to open after hiring and training thousands of workers to staff your hotels.
The other way is to buy an existing hotel company.
Square One
No sooner had Rasulo stated that expanding Disney’s resorts beyond their two current locations could help the company “claim a greater share of the hotel industry,” analysts in his audience began to wonder aloud which remaining REITs would be a good match for the Disney hotel experience.
If Disney is seriously thinking of expanding its hotel business beyond the boundaries of its Central Florida and Southern California properties, the reasoning goes, it would be far more cost effective to buy a company with a cadre of well-known brands and an established cash flow than it would to sink billions of dollars into the ground and wait for the day you can begin to collect receipts.
As Rasulo himself said, “Our hotels would need to continue to operate at the premium margins we've come to expect from our business. So we would only expand into environments that offered solid returns. We would also be careful to preserve our use of capital, especially since third-party equity capital for hotel investments is readily available. We may choose to fund our projects partially or fully with outside partners who recognize the value of the immersive Disney vacation experience.”
Our put another way, Disney could leverage its stock to merge with an existing REIT with multiple brand lines to become a majority stakeholder in the company, in much the same way it holds the lion’s share of stock (52%) in Citadel Communications, which owns ABC Radio, formerly owned by Disney’s ABC Broadcasting.
Rasulo has said if Disney does go forward with its hotel expansion plans, the new resorts would be built around its Grand Collection of hotels, such as the Victorian beach resort inspired Grand Floridian Hotel at Walt Disney World, and the Arts and Crafts inspired Grand Californian Hotel at the Disneyland Resort in Anaheim.
That would mean by partnering with a hotel company with multiple high-end luxury brands, which often have properties in the same markets, the Mouse could see a faster return on investment by selling one hotel line and using the funds to convert another to the Disney brand. But where to find such a partner?
With Nine You Get Egg Rolls
Based in White Plains, New York Starwood Hotels & Resorts Worldwide is one of the world’s largest hotel and leisure companies. The company owns, operates, franchises, and manages hospitality properties under nine brands: Sheraton Hotels and Resorts, Four Points by Sheraton, Westin, The Luxury Collection, Le Méridien, St. Regis, W Hotels, Element, and aLoft.
Starwood either owns or operates 850 hotels in 95 countries, with a total of 232,000 rooms and tens of thousands of square feet of meeting and events space. They have regional resort properties located outside of metro areas, urban hotels in cities that are major tourist destinations for families, destination resorts in exotic locations, and boutique-branded hotels at a variety of price points.
Former Disneyland Resort President Matt Ouimet.
Image copyright© obe-mediaone.
With the sudden departure of former CEO Steven J. Heyer, many hospitality industry analysts believe the company to be a prime target for takeover, either willingly or not,
No one is publicly suggesting the White Plains innkeeper and the Burbank conglomerate join hands. Privately, however, some are suggesting that even though it’s much sooner than Jay Rasulo’s peek into Disney Parks and Resorts future would have indicated, Starwood’s current predicament and likely availability seems tailor-made for Disney’s hospitality expansion plans.
Relations between the two companies are thought to be quite friendly. Starwood presently operates the only two non-Disney hotels on property at Walt Disney World, Sheraton Hotels and Resorts’ Swan and Dolphin luxury hotels.
George Mitchell, Disney’s former chairman, also served on Starwood’s board of directors. Additionally, Starwood Hotel Group President and newly appointed interim Chief Marketing Officer Matt Ouimet is the former president of the Disneyland Resort, and is a 17-year Disney veteran having also served as president of the Disney Cruise Line and executive general manager of the Disney Vacation Club.
Whether or not Disney is truly interested in rapidly expanding its presence in the hotel industry, it appears that holding informal conversations with old friends and acquaintances at Starwood would, at the least, be the polite thing to do while the hotelier sets the management of its house in order.
[As a direct result of the purchase of Pixar Animation Studios by the Walt Disney Company, C. W. Oberleitner now owns two shares of stock in the Walt Disney Company.—Editor]